You hear a lot about bad credit loans guaranteed approval but you wonder what it really means. How can anyone guarantee to approve a loan for someone with bad credit? It would seem even someone with experience in the area of making a bad credit auto loan would have trouble making this claim. As is often the case the answer is in the details. It stems from the guaranteed approval auto loan which was originally started by the small used auto dealers who did their own financing. They did a couple of things to make this work. These included:
1.They would price the car way above the market value. A car that’s worth says $1000 would be priced at $3500.
2.Then they would require you as part of the approved loan to make a down payment of $1000. At this point what do they have to lose?
3.On top of this they would tack on the opposite of best auto loan rates. They would charge the absolutely highest interest rate the law would allow in their particular area.
4.If this wasn’t bad enough they would then require weekly payments and if you were late or missed a week the car was immediately repossessed.
These types of practices were largely referred to as “buy here / pay here” and it’s no wonder that in many states these types of sales and financing practices are being outlawed. A borrower in similar circumstances today can go to the internet and search “online auto loans” and see their choices from many lenders and dealers. No longer do they have to rely on shopping a limited area. They can look for the best bad credit auto loan rates available anywhere in the country. The old buy here / pay here dealers are having to improve their business practices thanks to the internet. This is one of the very positive ways the internet has changed the retail auto business in a very positive way.
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